Walsh is stirring up the US Treasury market, whether he likes it or not.

Federal Reserve Chairman Warsh had signaled his hope that bond investors would focus on changes in the fundamentals of the U.S. economy, rather than trading based on comments from Fed officials. However, so far, the market has reacted in the opposite way.

Since taking office as chairman in May, the three largest single-day fluctuations in the U.S. Treasury yield curve have all occurred after Warsh's speeches : at the press conferences following the June and July policy meetings, and now after his speech at the Federal Reserve's annual meeting in Jackson Hole, Wyoming.

On Friday, the spread between the 2-year and 30-year Treasury yields narrowed by more than 9 basis points, with the yield curve showing a so-called "flattening" trend, as traders increased their bets on interest rate hikes.

A key reason Warsh is pushing the Fed to adjust its communication style is a phenomenon he described on Friday: financial markets react to comments from Fed officials, who in turn look to market performance for guidance on the economic outlook.

At a press conference in July, he said that market participants are now “learning to watch the game, not the referee,” intending to position the Federal Reserve as a neutral referee, rather than a participant driving market trends.

“His July claim that the market was ‘watching the referee’ is clearly untenable,” said Christopher Hodge, chief U.S. economist at Natixis. “The Fed is not the referee, but a significant player, and market movements reflect that reality.”

On Friday, Warsh warned that inflation had not slowed substantially and said policymakers must be convinced that inflation is cooling, or the Federal Reserve "still has work to do." The flattening of the Treasury yield curve was the largest since his first press conference as chairman in June, when he emphasized his determination to bring inflation back to the target level.

In July, however, Warsh's remarks triggered a completely opposite market reaction, with the US Treasury yield curve steepening by the largest margin since August 2025. Investors at the time stated that he failed to clearly articulate the Federal Open Market Committee's (FOMC) reasoning for maintaining interest rates.

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